NIKONREPORT
2014Year Ended March 31, 2014
Shin-Yurakucho Bldg., 12-1, Yurakucho 1-chome, Chiyoda-ku, Tokyo 100-8331 Japan(Scheduled to relocate to the following address on Nov. 25, 2014: Shinagawa Intercity Tower C, 2-15-3, Konan, Minato-ku, Tokyo 108-6290 Japan)
www.nikon.com
This eco-friendly booklet was produced using FSC®-certified paper; non-VOC (volatile organic compound), vegetable-oil ink; and waterless printing technology.
NIK
ON
CO
RP
OR
ATIO
NN
IKO
N R
EP
OR
T 20
14
Printed in Japan
About NIKON REPORT 2014Starting with reports published in the fiscal year ending March 2015, Nikon Corporation publishes its
previously named ANNUAL REPORT as the NIKON REPORT. In addition to details regarding business performance and strategy, operational overviews, and other financial data previously published in the
ANNUAL REPORT, this report comprises a broader range of non-financial data, including information on CSR activities and corporate governance.
As a corporate group that continues to pursue steady growth and create new value prefaced
on harmony with society, we hope that NIKON REPORT will promote further understanding of the Nikon Group among our shareholders, investors, and all other stakeholders.
INTRODUCTION
02 Nikon’s Growth Trajectory
04 Financial Performance
06 Non-Financial Performance
BUSINESS STRATEGY
08 Management Message
09 To Our Stakeholders
14 Medium-Term Management Plan Next 100 - Transform to Grow
18 Interviews with Key People on the Strategy Going Forward
18 Corporate Strategy Division
20 Semiconductor Lithography Business Unit
22 FPD Lithography Business Unit
24 Imaging Business Unit
26 Microscope Solutions Business Unit
28 Industrial Metrology Business Unit
30 Medical Business Development Division
31 Business Development Division
32 FOCUS: Intellectual Property Initiatives
CSR (SOCIAL AND ENVIRONMENTAL RESPONSIBILITY)
34 Nikon CSR Activities That Support Growth 36 Expansion and Promotion of Environmental
Management
38 Implementation of Compliance Activities
39 Respect for Human Rights and Labor Practices and Promotion of Diversity in the Workforce
41 Promotion of Social Contribution Activities
42 Promotion of CSR Activities in the Supply Chain
MANAGEMENT SYSTEM
44 Corporate Governance
46 Directors, Corporate Auditors, and Officers
FINANCIAL INFORMATION
48 Management’s Discussion and Analysis
52 Financial Statements and Notes
80 Independent Auditor’s Report
CORPORATE INFORMATION
81 Organization of the Nikon Group
82 Nikon Group Companies
84 Investor Information
85 Independent Practitioner’s Assurance of Social and Environmental Performance
CONTENTS
Independent Practitioner’s Assurance of Social and Environmental Performance
* International Standard on Assurance Engagements (ISAE) 3000 and 3410 These are standards on assurance engagements that were developed by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). The ISAE 3000 deals with “assurance engagements other than audits or reviews of historical financial information of entities,” which encompass assurance engagements on environmental information and information about social aspects. In particular, the ISAE 3410 prescribes the proce-dures of assurance engagements on greenhouse gas statements based on the ISAE 3000. To comply with the ISAE 3410, the requirements of the ISAE 3000 also need to be fulfilled.
* Inherent uncertainty Uncertainty is inherent in greenhouse gas quantification. This uncertainty is unavoidable for any entity that performs the calculations, because the global warming potential values and other elements used for the quantification are simply scientific assumptions today, and errors generated by measuring equipment and other sources are inevitable. This uncertainty does not mean that quantified values are inappropriate. The ISAE 3410 stipulates that information can be assured as long as the assumptions are reasonable and the information is adequately disclosed.
INdEpENdENT praCTITIONEr’S aSSuraNCE Of SOCIal aNd ENvIrONmENTal pErfOrmaNCENIKON rEpOrT 2014 85NIKON rEpOrT 2014
Statements contained in this report regarding the plans, projections, and strategies of Nikon Corporation and its subsidiaries and affi li-ates that comprise the Nikon Group that are not historical fact constitute forward-looking statements about future fi nancial results. As such, they are based on data that is obtainable at the time of announcement in compliance with the Nikon Group’s management poli-cies and certain premises that are deemed reasonable by the Nikon Group. Hence, actual results may differ, in some cases signifi cantly, from these forward-looking statements due to changes in various factors, including—but not limited to—economic conditions in princi-pal markets, product and service demand trends, customer capital expenditure trends, and currency exchange rate fl uctuations. This report covers the activities of domestic and foreign Nikon Group companies, centered on Nikon Corporation. In principle, the terms “the Company” and “Nikon Corporation” refer to Nikon Corporation, while “the Group” and “Nikon Group” refer to Nikon Corporation and its Group companies. With respect to Non-Financial Performance (pages 6 and 7) and CSR (Social and Environmental Responsibility) (pages 34 to 43), Nikon Corporation refers to itself, while the term “Group companies” refers to its 70 consolidated subsidiaries and two equity-method affi liates, and “Nikon Group” refers to Nikon Corporation and its Group companies. The report primarily lists the status of activities for the period from April 1, 2013, to March 31, 2014. More detailed CSR information can be found on the website (http://www.nikon.com/about/csr/). Please refer to both sources for a wide range of information. The fi nancial fi gures in this annual report have been rounded to the nearest unit (millions, billions, etc.).
Trustworthiness and CreativityOur corporate philosophy of “Trustworthiness and Creativity”—
simple words that are not easily put into practice.
These important words represent unchanging principles to which
we will always be dedicated.
Meeting Needs. Exceeding Expectations.“Our aspirations” mean not only to meet the needs of customers but also
to provide customers with new value that exceeds their expectations.
“Meeting needs. Exceeding expectations.” is our vision for the future.
Providing customers with new value that exceeds their expectations.
Sustaining growth through a break with the past and a passionate commitment by one and all.
Maximizing our understanding of light to lead the way towards transformation and a new future.
Maintaining integrity in order to contribute to social prosperity.
Our Philosophy
Our Aspirations
01NIKON REPORT 2014
1917 1970 1980 1990
Nikon’s Growth Trajectory
Nikon has been a pioneer in optical technology markets worldwide since its inception in 1917. Anchored by outstanding technological capabilities centered on opto-electronics and precision technologies, the Company has continued to take on challenges and steadily expand in business scale. With sights on the future, Nikon is striving to constantly deliver new value and realize sustainable growth.
INTRODUCTION
1980sApplication and Evolutionof Basic Technologies
1980
NSR-1010G marketed as Japan’s fi rst Step-and-Repeat System(stepper) for manufacturing of VLSIs; achieved high level of integration, throughput, and yield as a next-generation ultra-LSI production device
1986
NSR-L7501G large substrate exposure system marketed as Nikon’s fi rst LCD steppers and scanners; product launch was quick to meet increasing demand for liquid crystal displays
1988
Corporate name changed to Nikon Corporation
Net Sales
Foundation to the 1970sAmassing of Basic Technologies
1917
Nippon Kogaku K.K. established
1921
MIKRON 4x and 6x ultra-small-prismbinoculars marketed—fi rst binoculars developed, designed, and manufactured by Nikon
1925
JOICO Microscope marketed—fi rst microscope designed by Nikon
1945
With the end of World War II, production shifts to binoculars, cameras, microscopes, surveying instruments, measuring instruments, ophthalmic lenses, and other consumer optical devices
1948
Nikon Model small-sized camera marketed—fi rst Nikon camera and fi rst to bear the “Nikon” name
1959
Nikon F SLR camera—Nikon’s fi rst interchangeable-lens SLR camera—marketed with many world-fi rst features, establishing position as a high-endSLR camera
MIKRON 6x
02 NIKON REPORT 2014
1,000,000
800,000
600,000
400,000
0
200,000
2000 2010 2014
2000
Corporate philosophy defi ned as “Trustworthiness and Creativity”
2006
NSR-S609B ArF immersion scanner marketed—fi rst to incorporate immersion lithography technology
2007
BioStation CT cell culture observationsystem marketed; equipped with amicroscope in the incubator, it hasexpanded the possibilities of livecell observation
2009
FX-101S FPD scanner supporting 10th-generation mother glass(about three square meters) marketed
2011
Nikon 1 J1 and V1 advancedcameras with interchangeablelenses marketed
2013
Identifi ed the fi eld of health and medicine as a target for new business; began exploring options to develop fundamentals in the business
2014
D4S digital SLR camera marketed
Millions of yen
2000s to TodayAiming for the Next Growth Stage
1990sEstablishing Business Foundation
1990
Nikon (Thailand) Co., Ltd., established in Thailand as Nikon’sfi rst full-scale overseas production base
1997
COOLPIX 100 and 300 digital cameras marketed as Nikon’s fi rst compact digital camera
1999
D1 digital SLR camera marketed, offering overall picture quality and high-speed performance; priced with general users in mind, it contributed to the popularity of digital SLR cameras
Nikon 1 J1
COOLPIX 100
03NIKON REPORT 2014
Financial PerformanceNikon Corporation and Consolidated SubsidiariesYears ended March 31
INTRODUCTION
2005 2006 2007 2008For the year:
Net sales ¥ 638,468 ¥ 730,944 ¥ 822,813 ¥ 955,792 Precision Equipment 212,470 242,318 291,913 290,814 Imaging Products 354,181 415,686 448,825 586,147 Instruments 50,657 53,280 59,252 59,043 Cost of sales 429,143 468,944 494,663 551,551 Selling, general and administrative expenses 178,780 195,413 226,143 269,072 Operating income (loss) 30,545 66,587 102,007 135,169 Precision Equipment 11,387 26,375 49,321 43,348 Imaging Products 16,841 34,369 45,678 83,974 Instruments 2,826 4,085 5,123 4,081 EBITDA*3 50,250 87,347 124,632 160,847 Income (loss) before income taxes and minority interests 33,443 40,925 87,813 116,704 Net income (loss) 24,141 28,945 54,825 75,484
Per share of common stock (yen and U.S. dollars)*1: Basic net income (loss) ¥ 65.19 ¥ 78.16 ¥ 146.36 ¥ 189.00 Diluted net income 57.84 69.33 131.42 181.23 Cash dividends applicable to the year 8.00 10.00 18.00 25.00
Capital expenditures ¥ 22,459 ¥ 25,817 ¥ 30,432 ¥ 39,829 Depreciation and amortization 19,705 20,760 22,625 25,678 R&D costs 33,561 37,139 47,218 58,373
At year-end:Total assets ¥ 633,426 ¥ 690,920 ¥ 748,939 ¥ 820,622 Total equity 196,030 243,122 348,445 393,126 Interest-bearing debt 195,351 178,841 105,338 76,544
Financial ratios:Equity ratio (%) 30.9 35.2 46.5 47.9Debt equity (D/E) ratio*3 (times) 1.00 0.74 0.30 0.19ROE*3 (%) 13.1 13.2 18.5 20.4ROA*3 (%) 3.9 4.4 7.6 9.6
Number of subsidiaries 46 47 49 48Number of employees 16,758 18,725 22,705 25,342
*1. Per share of common stock information is computed based on the weighted average number of shares outstanding during the year.*2. U.S. dollar fi gures are translated for reference only at ¥102.92 to US$1, the exchange rate at March 31, 2014.*3. Throughout this annual report, EBITDA is calculated as operating income (loss) plus depreciation and amortization expenses, ROE is calculated as net income (loss) divided by average
shareholders’ equity, ROA is calculated as net income (loss) divided by average total assets, and D/E ratio is calculated as interest-bearing debt divided by total equity.
Total Equity and Equity Ratio(As of March 31)Millions of yen %
Interest-Bearing Debt and D/E Ratio*3
(As of March 31)Millions of yen Times
Total equity (left scale) Equity ratio (right scale) Interest-bearing debt (left scale) D/E ratio (right scale)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
600,000
500,000
400,000
300,000
200,000
100,000
0
60
50
40
30
20
10
0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
200,000
150,000
100,000
50,000
0
1.2
0.9
0.6
0.3
0
04 NIKON REPORT 2014
ROE*3 and ROA*3
(Years ended March 31)%
Geographic Sales(Year ended March 31, 2014)
ROE ROA
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
25
20
15
5
10
–5
0
Japan
15.3%China
14.4%
Europe
25.9%United States
22.7%
Others
21.6%
Millions of yenThousands of U.S. dollars*2
2009 2010 2011 2012 2013 2014 2014
¥ 879,719 ¥ 785,499 ¥ 887,513 ¥ 918,652 ¥ 1,010,494 ¥ 980,556 $ 9,527,362 219,915 150,101 208,614 248,145 179,013 205,447 1,996,178596,468 569,465 596,376 587,127 751,241 685,446 6,659,991
44,642 45,051 57,452 56,000 53,877 64,709 628,730561,642 552,409 575,536 567,000 663,509 630,568 6,126,783269,892 246,944 257,924 271,571 295,983 287,046 2,789,021
48,185 (13,854) 54,053 80,081 51,002 62,942 611,5588,041 (58,557) 2,712 42,724 13,090 20,079 195,095
40,039 52,117 52,332 53,972 60,711 64,284 624,606(2,724) (9,331) (5,248) (3,166) (4,978) (2,156) (20,953)81,095 22,102 88,087 112,651 87,227 105,419 1,024,28139,180 (17,672) 46,506 86,168 61,857 74,692 725,72828,056 (12,615) 27,313 59,306 42,459 46,825 454,963
¥ 70.76 ¥ (31.82) ¥ 68.90 ¥ 149.57 ¥ 107.07 ¥ 118.06 $ 1.1567.91 — 68.83 149.41 106.92 117.88 1.1518.00 8.00 19.00 38.00 31.00 32.00 0.31
¥ 43,467 ¥ 37,525 ¥ 29,776 ¥ 55,915 ¥ 60,158 ¥ 45,472 $ 441,81932,910 35,956 34,034 32,570 36,226 42,477 412,72261,489 60,261 60,767 68,701 76,497 74,552 724,369
¥ 749,805 ¥ 740,632 ¥ 829,909 ¥ 860,230 ¥ 864,668 ¥ 949,515 $ 9,225,763 379,087 372,070 389,220 433,617 490,218 546,813 5,312,991114,940 102,388 87,476 86,367 85,348 127,132 1,235,254
50.5 50.2 46.8 50.3 56.6 57.50.30 0.28 0.22 0.20 0.17 0.23
7.3 (3.4) 7.2 14.4 9.2 9.0 3.6 (1.7) 3.5 7.0 4.9 5.2
48 69 68 68 71 7023,759 26,125 24,409 24,348 24,047 23,859
05NIKON REPORT 2014
CO2 Emissions from Nikon Corporation and Group Manufacturing Companies in Japan (Calculated by fi xing the CO2 emission factors for the use in the Action Plan)
(Years ended March 31)Thousand tons of CO2 Index
1Notes to the graph are as follows.
Notes 1 through 6 apply to seven Group manufacturing companies in Japan and two Group manufacturing companies outside Japan. Refer to “The Nikon Group’s Environmental Management Systems and Environmental Performance Data Boundary” on the Nikon Group website for more details.
http://www.nikon.com/about/csr/envi-ronment/promote/management/
1 CO2 Emissions from Nikon Corporation and Group Manufacturing Companies in Japan
The values above are the aggregated results of CO2 emissions from energy use.The baseline emissions are the average value between the year ended March 31, 2006, and the year ended March 31, 2008. The CO2 emission factors are the weighted average values of the actual emission factors between the year ended March 31, 2006, and the year ended March 31, 2008 (fi xed for all periods).The CO2 emissions are calculated using the following unit heating values:City gas: Specifi c value of each gas companyOther fuels: Values contained in the Manual for Calculating and Reporting Greenhouse Gas Emissions for the baseline emission calculation
2 Energy Use by Nikon Corporation and Group Manufacturing Companies in Japan
The baseline use is the average value between the year ended March 31, 2006, and the year ended March 31, 2008.The energy use is calculated using the following unit heating values:Electricity: 0.00976 GJ/kWh (fi xed for all periods)City gas: Specifi c value of each gas companyOther fuels: Values contained in the Manual for Calculating and Reporting Greenhouse Gas Emissions for the use calculation of each year
3 CO2 Emissions from Group Manufacturing Companies outside Japan
The baseline emissions are the average value between the year ended March 31, 2006, and the year ended March 31, 2008.The CO2 emission factors are the weighted average values of International Energy Agency (IEA) factors by country between 2005 and 2007 (fi xed for the whole period).The baseline year for emissions per unit of real output (index) is set at the year ended March 31, 2007 (year ended March 31, 2007 = 1).For the year ended March 31, 2012, the calculation of CO2 emissions from Nikon (Thailand) Co., Ltd., was limited to the period from April through September due to the temporary shutdown of the company’s plants as a result of the fl ood in Thailand.
7 Employee Numbers (Non-Consolidated, Consolidated)
Consolidated fi gures include permanent and non-regular staff of the Nikon Group and directors of Group companies. For regional percentages, employees of Nikon Corporation who are temporarily dispatched to Group companies are included in the region to which they are assigned, while employees dispatched to non-consolidated companies are not included. Employees of Nikon Metrology NV and its subsidiary Group companies are included in the European fi gures.
8 Percentages of Female Employees and Managers at the Nikon Group
Permanent employees and non-regular staff in the Nikon Group (consolidated):Those dispatched to affi liates are counted as employees of the affi liates.The fi gures for the year ended March 31, 2013, include the fi gures for the two equity-method affi liates.“Managers” means section managers and higher. Managers of Nikon Corporation include those in positions other than department manager or higher and those in section manager positions.Group companies outside Japan include Nikon (Thailand) Co., Ltd., Nikon Imaging (China) Co., Ltd., and Hikari Glass (Changzhou) Optics Co., Ltd.
Percentage of female employees Nikon Corporation Group companies in Japan Group companies outside Japan
Percentage of female managers■■ Nikon Corporation ■■ Group companies in Japan ■■ Group companies outside Japan
62.663.265.969.2
73.5
16.916.916.817.017.0
25.224.524.925.1
19.4
10.09.79.49.28.83.63.12.52.31.8 2.93.13.12.32.30.80.81.71.7
20112010 2012 2013 2014
80
40
60
20
0
40
30
20
10
0
Percentages of Female Employees andManagers at the Nikon Group
(As of March 31)Percentage of female employees: % Percentage of female managers: %
8
■■ Nikon Corporation ■■ Group manufacturing companies in Japan Energy use per unit of sales (Index)
1,372
3,357
1,180 1,112 1,095 1,037
1,985 1,964 1,863 1,915 1,886
1.00 0.87 0.81 0.76 0.783,144
3,011 2,9232,9744,000
2,000
3,000
1,000
0
1.00
0.75
0.50
0.25
02011 2012 2013 2014Baselineenergy use
Energy Use by Nikon Corporation and Group Manufacturing Companies in Japan
(Years ended March 31)TJ Index
2
■■ Amount of waste disposal ■■ Amount recycled■■ Amount of mass reduction ■■ Amount of landfi ll disposal
Recycling rate
3,02210 3
99.6
3,035
4,000
2,000
3,000
1,000
0
100
75
50
25
02010 2011 2012 2013 2014
Disposal, Landfi ll, and Recycling of Waste Including Valuable Resources at Nikon Corporation
(Years ended March 31)Tons %
5
■■ Amount of waste disposal ■■ Amount recycled■■ Amount of mass reduction ■■ Amount of landfi ll disposal
Recycling rate
2,326
76 55
94.7
2,457
4,000
2,000
3,000
1,000
0
100
75
50
25
02010 2011 2012 2013 2014
Disposal, Landfi ll, and Recycling of Waste Including Valuable Resources at GroupManufacturing Companies in Japan
(Years ended March 31)Tons %
6
■ ■ Non-consolidatedConsolidated ■■ Japan ■■ Americas ■■ Europe ■■ Asia and Oceania
42.6%5.3%7.1%
44.9%
5,315 5,306 5,397 5,583 5,684
26,125 24,409 24,348 24,047 23,859
20112010 2012 2013 2014
30,000
15,000
25,000
10,000
20,000
5,000
0
Employee Numbers(Non-Consolidated, Consolidated)
(As of March 31)Employees
7
■■ Nikon Corporation ■■ Group manufacturing companies in Japan Emissions per unit of sales (Index)
65
146
54 51 50 47
80 80 76 78 77
1.00 0.85 0.80 0.740.77
134 128 124127
2011Baselineemissions
2012 2013 2014
150
120
60
90
30
0
1.5
1.2
0.9
0.6
0.3
0
INTRODUCTION
■■ Group manufacturing companies outside Japan Emissions per unit of real output (Index)
1.001.00
0.91 0.85 0.92
54 76 57 60 61
Baselineemissions
100
80
40
60
20
0
1.5
1.2
0.9
0.6
0.3
02011 2012 2013 2014
CO2 Emissions from Group Manufacturing Companies outside Japan
(Years ended March 31)Thousand tons of CO2 Index
3
■■ Nikon Corporation ■■ Group manufacturing companies in Japan
848
2,497833 899 919 902
1,6491,937 2,126 2,013 1,917
2,770 2,932 2,8193,026
2010
4,000
2,000
3,000
1,000
0 2011 2012 2013 2014
Water Use by Nikon Corporation and Group Manufacturing Companies in Japan
(Years ended March 31)Thousand m3
4
Non-Financial Performance: Includes quantitative data covered by independent practitioner’s assurance. (See page 85 for details.)
06 NIKON REPORT 2014
Notes to the graph and table are as follows.
9 Number of Employees Taking Childcare Leave
10 Number of Employees Taking Nursing Care Leave
Permanent employees and non-regular staff. Employees of equity-methodaffi liates are excluded.
12 Severity Rates at Nikon Corporation and Group Companies in Japan
“0.00” indicates a rate of less than 0.005.
15 Inclusion in SRI Index Portfolio and Other Indices
*1. Socially responsible investment index featuring leading companies from around the world, compiled by FTSE, a subsidiary of the London Stock Exchange.
*2. The Morningstar Socially Responsible Investment Index (MS-SRI) is the fi rst socially responsible investment index in Japan. Morningstar Japan K.K. selects 150 companies from among approxi-mately 3,600 listed companies in Japan by assessing their social responsibility and converts their stock prices into the index.
*3. ESG (environment, society, gover-nance) surveys, ratings from ECPI
*4. Joint selection and announcement by Japan’s Ministry of Economy, Trade and Infrastructure and the Tokyo Stock Exchange, Inc., of listed companies with outstanding perfor-mance in supporting career develop-ment for women.
*5. Investment universe comprised of companies identifi ed by Forum Ethibel as displaying high perfor-mance in terms of social responsibility.
2010 2011 2012 2013 2014
Nikon Corporation
Men 2 3 4 7 3
Women 29 21 15 16 22
Group companiesin Japan
Men 0 0 1 1 1
Women 15 28 28 35 32
Number of Employees Taking Childcare Leave(Years ended March 31) People
9
2010 2011 2012 2013 2014
Nikon Corporation
Men 2 1 1 1 2
Women 0 1 2 0 0
Group companiesin Japan
Men 3 6 1 0 0
Women 3 5 3 1 2
Number of Employees Taking Nursing Care Leave(Years ended March 31) People
10
153218
296340
400
2009
450
300
150
0 2010 2011 2012 2013
Number of Patent Registrations in U.S.(CY)
14
SRI index portfolio and other indices
From 2004 FTSE4 Good Index Series*1
From 2010 Morningstar Socially Responsible Investment Index (MS-SRI)*2
From 2011 ECPI Ethical Index Global*3
From 2013 Nadeshiko Brand*4
From 2013 “Ethibel EXCELLENCE” (part of the Ethibel Investment Register)*5
Inclusion in SRI Index Portfolio and Other Indices (As of March 31, 2014)15
1,771
2,203
1,685 1,5421,832
2009
2,500
2,000
1,000
1,500
500
0 2010 2011 2012 2013
Number of Published Patent Applications in Japan(CY)
13
Frequency Rates of Lost Time Accidents at Nikon Corporation and Group Companies in Japan
(Years ended March 31)
11
All industries in Japan (CY) Manufacturing industry in Japan (CY) Nikon Corporation 25 Group companies in Japan (including non-consolidated companies)
1.581.591.621.611.62
0.941.001.050.98
0.32
0.440.760.54
0.99
0.48
0.380.290.200.20
20112010 2012 2013 2014
2.0
1.0
1.5
0.5
0
Severity Rates at Nikon Corporation and Group Companies in Japan
(Years ended March 31)
12
2010 2011 2012 2013 2014
All industries in Japan (CY) 0.09 0.09 0.11 0.10 0.10
Manufacturing industry in Japan (CY) 0.08 0.09 0.08 0.10 0.10
Nikon Corporation 0.00 0.00 0.00 0.70 0.01
25 Group companies in Japan(including non-consolidated companies)
— 0.01 0.01 0.01 0.00
07NIKON REPORT 2014
A Nikon Group Capable of Another Century of GrowthIn the fi scal year ended March 2014, consolidated net sales declined 3.0% year on year, to ¥980.6 billion, while operating income climbed to ¥62.9 billion, a year-on-year increase of 23.4%. In addition to top- and bottom-line growth in the Precision Equipment Business, this performance refl ected higher earnings in the Imaging Products Business, despite lower sales due to weak market conditions. Ahead of the 100th anniversary of the Nikon Group in 2017, in June 2014 the Group announced “Next 100 - Transform to Grow,” a three-year Medium-Term Management Plan designed to set it on the road to another 100 years in business. Guided by this plan, our goal is to realize sustainable growth by establishing a new business portfolio. We ask for the continued support of our shareholders, investors, and other stakeholders as we move forward into our next century.
Makoto KimuraChairman of the BoardRepresentative Director Junichi Itoh
Senior Executive Vice President, CFORepresentative Director
Kazuo UshidaPresidentRepresentative Director
Management Message
BUSINESS STRATEGY08 NIKON REPORT 2014
To Our Stakeholders
Kazuo UshidaPresident Representative Director
For 98 years, the Nikon Group has cherished “Trustworthiness and Creativity.” Trustworthiness will continue to be a pillar to support our business activity, as we strive to change our business model and create new value in contributing widely to society and the environment.
Basic Management Policy
Transitioning from hardware to solutions—establishing a new business model
Under the corporate philosophy of “Trustworthiness and Creativity,” the Nikon Group has
always offered new value and aimed for sustainable growth. In 2017, we will celebrate our
100th anniversary, and this corporate philosophy will remain close to our hearts for as long
as Nikon carries on.
As a fi rst step into the next 100 years, we announced the Medium-Term Management
Plan Next 100 - Transform to Grow (hereinafter, the Medium-Term Plan), to culminate in the fi scal year ending March 2017. Woven into this title is a determination to resolutely
reform our structure to evolve our business model toward sustainable growth. Until now,
Nikon was grounded in the idea of using its own technology to develop, manufacture, and
market products, so it employed a hardware-oriented strategy. In this rapidly changing
business climate, however, establishing distinction in hardware alone has its limits. We thus
perceived a need to add application software to the hardware that has been our mainstay to
evolve into a solutions-oriented business model and sustain growth in the future. Although
we will continue with a strategy based on our core competencies, we must not attempt to
undertake everything on our own; rather, we must steadfastly deliberate ideas to help solve
problems faced by customers and society. If we can use both hardware and software to
increase our contact with customers, a brighter picture of our new future will emerge.
As growth of our existing businesses slackens, setting up new businesses is becoming
urgent. We have always met challenges head-on, and in these turbulent times we must
further accelerate the commercialization of new businesses. We need to judiciously draw
cash from our robust fi nancial base and existing businesses to establish new businesses as
our next pillars of revenue, while at the same time invest just enough in existing businesses
to make them competitively stronger.
09NIKON REPORT 2014
BUSINESS STRATEGY
Management Strategy
A Medium-Term Management Plan describing growth through a portfolio of six businesses
The markets of our core businesses—the Semiconductor Lithography Business, the FPD
Lithography Business, and the Imaging Products Business—have reached degrees of matu-
rity that have little prospect for dramatic growth in the medium-to-long term, so the time
has come to enhance our operating structure. For the fl edgling Medical Business that we
have started, we need to create a road map that clearly places profi tability on the horizon.
With these issues in mind, the Medium-Term Plan envisions our metamorphosis as
a corporate entity from being driven predominantly by profi ts from the FPD Lithography
Business and the Imaging Products Business to growth through a portfolio of six businesses:
the Semiconductor Lithography Business, the FPD Lithography Business, the Imaging
Products Business, the Microscope Solutions Business, the Industrial Metrology Business,
and the Medical Business. Financial targets set for the entire Company for the year ending
March 2017 are net sales of ¥1.2 trillion, operating income of ¥110 billion, and an operat-
ing margin of 9.2%.
In the three businesses that have presently led growth—the Semiconductor Lithography
Business, the FPD Lithography Business, and the Imaging Products Business—we will gen-
erate additional cash by both expanding sales and reducing costs. In areas where we expect
future growth—the Medical Business, the Microscope Solutions Business, and the Industrial
Metrology Business—we will funnel a sizeable portion of our business resources to make
these businesses profi table in the fastest possible timeframe. For the Medical Business, we
have set a target of ¥200 billion in net sales, and the Microscope Solutions Business and
the Industrial Metrology Business have a combined target of ¥100 billion in net sales by the
fi scal year ending March 2017.
In the fi scal year ending March 2015, the initial year of the Medium-Term Plan, we
do not expect the Medical Business to generate any sales, and consequently the other fi ve
businesses must achieve profi tability to support our investment in the Medical Business as
it strives to contribute to the Group’s earnings.
To Our Stakeholders
For additional details on the strate-
gies of each business, please refer
to the series of interviews,
“Interviews with Key People on the
Strategy Going Forward.”
P. 18–31
10 NIKON REPORT 2014
To achieve the goals outlined in the Medium-Term Plan, four programs centered on M&A,
R&D, human resources, and cost reduction have been introduced.
In M&A, funds of ¥200 billion has been budgeted over three years, primarily for the
Medical Business and the Instruments Business, and ¥30 billion of corporate venture
capital has been earmarked over three years for energizing the Medical Business. Another
¥220 billion has been allocated for R&D, which we believe we can obtain from funds
currently on hand and funds that will be on hand; however, if necessary we will consider
such debt fi nancing as bank loans. Our intention to maintain our currently solid fi nancial
base is unchanged. Venture capital will be used in the pursuit of open innovation, so we
will not limit ourselves to gathering information on cutting-edge technology from venture
businesses targeted for investment. Instead, we will actively work with businesses that will
have been passed over as well.
Of the ¥220 billion allocated over three years for R&D, ¥50 billion will be directed to
the Medical Business and other potential new businesses. Our Core Technology Division
serves as a hub for the Nikon Group’s long-term technical strategy and for undertaking tasks
related to developing technology, encouraging horizontal developments, and collaborations.
We also place importance on collaborating with venture businesses, which offer cutting-edge
technologies that, combined with our technological strengths, can be used to turn ideas
into products.
The human resources program has been set up to give increased mobility to human
resources and to bring in people with special skills. The movement of people across
business boundaries was limited under the in-house company system, but this program
enables us to readily reassign employees according to their talents. If we are unable to
locate someone in-house with a required skill, we bring in outside talent, such as someone
Restructuring the organization to conform to the Medium-Term Management Plan
Four programs introduced for the establishment of a new Nikon
When our businesses were growing quickly, swift decision making was needed to keep pace
with rapidly expanding markets, so our in-house company system that promoted worksite
decisions was effective for each company. The brisk expansion of the Imaging Products
Business over the past 10 years was particularly a boon under our in-house company
system. Yet we are now relinquishing the in-house company system in favor of one that
is more under the direct control of the president to more effi ciently carry out top-down
decisions. This move is in no way to denigrate our past achievements. To respond to
diversifi ed needs and create new value, we must recognize we have entered a stage that
requires overarching control to compare and sort out various ideas. We decided it was time
to change and reorganize to a fl atter business structure. The Corporate Strategy Division
has been established to oversee all businesses and allocate resources to benefi t the entire
organization rather than separate businesses.
11NIKON REPORT 2014
BUSINESS STRATEGY
CSR-Oriented Management
CSR activities that support growth
As a global enterprise, we consider it a matter of course to be mindful of the environment
and human rights and to act in the global common interest. We further endeavor to respond
adequately to social needs that may differ depending on the country or region.
The Nikon Group obtains approximately 85% of its net sales from outside of Japan.
About 60% of our employees, both Japanese and local hires, work outside Japan. We believe
the Group can sustain growth if our employees around the world are able to work in conditions
engendering high motivation. We are enlisting the support of every one of our employees to
We readily sow seeds in all areas to turn risks into opportunities.
One reason for the decline in demand for compact digital cameras has been the growth of
smartphones. Although this may always be considered a risk, it could also be viewed as a
business opportunity. With the spread of smartphones, the number of people taking pictures
at every chance has increased dramatically. In addition, once pictures have been taken,
sharing them on the Internet has become a simple and routine matter. Cameras were
expensive in the past, and children hardly touched them. Now, everyone, including children,
enjoys taking and sharing pictures. Simply put, we have ever-widening latent demand at
hand. Our task is to discover how users may take advantage of our products and services.
The Imaging Products Business has sown various seeds, including product development of
new concepts. At the earliest, these ideas may begin to contribute to our profi ts from the
fi scal year ending March 2016.
Competition may be stiff for selling semiconductor lithography systems, but through
R&D the performance of our products is a full notch above that of our competitors. Thanks
to our distinct improvements to previous equipment, we are luring customers our way.
With opportunities afforded by bringing in additional customers, inquiries from others are
increasing, so we are sowing even more seeds to gain a higher market share.
In the Instruments Business, we are also moving from a business model based primarily
on hardware sales to the provision of solutions. To that end, we are making a wide variety
of proposals.
To Our Stakeholders
with experience in the medical industry, M&A, or venture capital or an expert with
specialized knowledge.
Under the cost reduction program, we are scrutinizing design and manufacturing
processes and also reexamining our production framework from the ground up in step with
the redevelopment of our business portfolio. Moreover, we are searching for ways to cut
indirect costs across the Company and within business units.
12 NIKON REPORT 2014
A Closing Word
The Nikon Group is an enterprise offering products that help people fulfi ll their lives,
a mission we would like to uphold. A camera is an item that can be quickly identifi ed as
a representative Nikon product; however, our industrial products such as semiconductor
lithography systems and FPD lithography systems are items that most of our customers
may never see directly. Yet these industrial products result in IC devices, LCD panels, and
organic light-emitting diode (OLED) panels used in home electronics and appliances and
automobiles that people use daily, so we are supporting our customers’ lives. As we go
forward, especially as we move away from hardware toward solutions, Nikon products will
most certainly be recognized in various types of places. Under the Medium-Term Plan,
we are aiming to expand with new businesses in health and medical-related areas—ones
that particularly call for trustworthiness. I hope that our commitment to “quality befi tting
trustworthiness” is so high that people will react with delight to discover that an unlabeled
product is actually made by Nikon.
The business environment is uncertain and undergoing dramatic changes. To continue
steady growth over the next 100 years, we have a strong determination to develop new
businesses that will become profi table and expand our business domain by offering solutions
to our customers. Although the reorganization we embarked upon may have involved some
vital changes in-house, such renewal should enhance each employee’s chance to manifest
his or her strengths. As each employee becomes further empowered, the collective organic
effect gives me confi dence that the Nikon Group can progress in a direction for the better.
September 2014
President Representative Director
achieve the goals of the Medium-Term Plan. As culture, history, language,
and ways of thinking vary from region to region, we fi nd it is important to
communicate closely with local employees to understand each other’s way of
thinking and respond faithfully to their needs. CSR activities should never be
imposed from above. We seek to fully understand the culture of the location
where our employees work and what they consider to be important.
Further, we need to bear two points in mind when selling our products
globally. First, our products themselves must be implicitly trustworthy. Second,
we must be contributing to social development. Our organization is expected to
not only observe the law but also respect people and act ethically. Considering
the problem of confl ict minerals, we must make it unambiguously clear, both
in-house and publicly, that we do not use materials for which humanity or
morals may have been compromised.
13NIKON REPORT 2014
An Organization That Supports Structural Reforms
In June 2014, we initiated an organizational redeployment designed to develop a framework for supporting structural reforms that will enable sustainable growth and realize a more resilient corporate structure. To this end, we abolished the previous in-house company system that had been in place for nearly 15 years in favor of a divisional organization under direct control of the president of Nikon and divided by business area. For the Medical Business, we established the Medical Business Development Division, also directly overseen by the presi-dent, to promote faster business development and develop a clear organizational and leadership structure for this business.
Previous In-house Company System Six Core Business Units and Divisions
Medium-Term Management Plan Next 100 - Transform to Grow
Achieve growth leveraging a portfolio of six businessesFor our core Semiconductor Lithography, FPD Lithography, and Imaging Products businesses, the goal is to achieve additional growth
by strengthening business fundamentals to improve profi tability. In parallel, we will groom the Medical, Microscope Solutions, and
Industrial Metrology businesses, for which market growth is projected, into major earners. Through these measures, the new plan will
see the reemergence in the near future of a corporate structure under which a portfolio of six businesses drives growth.
Basic Policy
Announced in June 2014, this Medium-Term Management Plan comprises measures for solidifying and realizing our vision for the Nikon Group. The plan calls for sweeping structural reforms, among them rebuilding our business portfolio, reallocation of management resources, and organizational redeployment. As we approach our 100th anniversary in 2017, we will mark this milestone by moving to a new growth stage for our next century.
BUSINESS STRATEGY
Precision Equipment CompanySemiconductor
Lithography Business Unit
FPD Lithography Business Unit
Medical Business Development DivisionImaging Company
Imaging Business Unit
Instruments Company Microscope Solutions Business UnitIndustrial Metrology
Business Unit
Medium-Term Management Plan
Next 100 - Transform to Grow
To become a Nikon Group that constantly creates new valueand continues to grow• Expanding the Nikon brand
• Accelerating the development of new businesses
• Bolstering our leading position in existing businesses
• Achieving a robust corporate structure that acts with speed and fl exibility
Present Challenges
1. Strengthen our maturing core businesses
2. Defi ne and begin to execute our growth strategy in the Medical Business
3. Build an organizational structure that facilitates the rebuilding of our business portfolio
14 NIKON REPORT 2014
Strengthen business fundamentals Growth drivers
Priority Measures
Foster new businesses and strengthen existing businesses
Pro
fi tab
ility
Growth potential
Microscope Solutions Business /Industrial Metrology Business
• Aim for business with net sales on the scale of ¥100 billion
• Switch emphasis mainly from hardware to solutions
• Aggressively pursue M&A and alliances
M&A Program
• Spend ¥200 billion in M&A funds on the Medical and Instruments businesses
• Launch corporate venture capital on the scale of ¥30 billion for the Medical Business and encourage open innovation
R&D Program
• Of ¥220 billion R&D budget (March 2015 fi scal year to March 2017 fi scal year), invest ¥50 billion in the Medical Business and new business domains
• Generate synergies among technologies, setting the Core Technology Division as a hub
• Cultivate venture companies
Human Resources Program
• Enable the interdivisional fl ow of personnel• Hire experienced experts• Reform the mind-set among all employees and cultivate the next
generation of leaders
Cost Reduction Program
• Reduce costs in design and manufacturing processes• Reduce overhead at headquarters and in business units• Fundamentally review production regime to refl ect the rebuilding
of the business portfolio
Four Programs to Achieve Transformation
FPD Lithography
Business
Imaging Products Business
Medical Business
Maintain profi tability
Solidify profi tability
Improve profi tability New growth
drivers
Management Numerical Targets
Foreign Exchanges Assumptions (Yen)
Years ended / ending March 312014 (result)
2015 (forecast)
2016 (forecast)
2017 (forecast)
US$ 100.17 101 100 100
Euro 134.21 136 140 140
Net Sales / Operating Income / Operating Margin(Years ended / ending March 31)Billions of yen %
R&D Expenses
Cumulative for March 2015 fi scal year to March 2017 fi scal year
¥220 billionOf which, ¥50 billion to be invested in Medical Business and new businesses
Capital Expenditures
Cumulative for March 2015 fi scal year to March 2017 fi scal year
¥110 billion
■■ Net sales (left scale) ■■ Operating income (left scale) — Operating margin (right scale)
* Figures for the fi scal year ending March 2015 are as of August 7, 2014; fi gures for the fi scal year ending March 2016 and the fi scal year ending March 2017 are as of the announcement of the Medium-Term Management Plan on June 17, 2014.
62.9 53.0 90.0 110.0
9.28.6
5.96.4
980.6900.0
1,050.01,200.0
2014(result)
2015(target)
2016(target)
2017(target)
2,000
1,200
1,600
800
400
0
10
8
6
4
2
0
Microscope Solutions Business
Industrial Metrology Business
Concentrated shift of management resources from
existing businesses
Medical Business
• Aim for business with net sales on the scale of ¥200 billion
• Redirect internal and external management resources to Medical Business
• Aggressively pursue M&A and alliances
Semiconductor Lithography
Business
15NIKON REPORT 2014
Business LinesDevelopment and manufacture of semi-conductor lithography systems for the production of semiconductors used pri-marily in electronics
Current State• Market growth is fl at• Competitive environment remains harsh• Need new technology to support
advances in fi ner patterning
▲
Requires massive investments• Improvement in breakeven point needed
Strategic Direction• Enhance profi tability through structural
reforms• Achieve 30% market share in ArF
immersion scanners
Business LinesDevelopment and manufacture of FPD lithography systems for the production of LCD and OLED panels
Current State• Capital investment is fl at in the FPD
industry• Possess strong technological
capabilities and profi tability
Strategic Direction• Launch innovative next-generation
product that delivers both high resolu-tion and high cost performance; protect our technological superiority by accel-erating development of the new method
• Promote thorough gains in effi ciency and cost reductions
• Respond to fl uctuations in demand with a fl exible production regime
Business LinesDevelopment and manufacture of inter-changeable lens-type digital cameras, compact digital cameras, and other products
Current State• Digital camera market is maturing• Technology supporting basic functions
is maturing• Basis for evaluating products is shifting• Room for growth in markets in emerging
countries• Low costs increasingly important
Strategic Direction• Launch innovative new products• Introduce a new marketing strategy• Gain new depth and new exposure in
emerging markets• Cut costs from development at every
stage to sales
BUSINESS STRATEGY
Portfolio of Six BusinessesWhile continuing to fundamentally strengthen its core Precision Equipment and Imaging Products businesses, the Nikon Group is cultivating the Instruments and Medical businesses, which are positioned as growth fi elds. The Group will achieve sustainable growth through a portfolio of six businesses—Semiconductor Lithography, FPD Lithography, Imaging Products, Microscope Solutions, Industrial Metrology, and Medical.
Further Strengthening Business Fundamentals
Semiconductor Lithography Business FPD Lithography Business Imaging Products Business
Medium-Term Management Plan Next 100 - Transform to Grow
P. 20 P. 22
Business Areas
Precision Equipment Business: Semiconductor Lithography and FPD Lithography Businesses Instruments Business: Microscope Solutions and Industrial Metrology Businesses
P. 24
16 NIKON REPORT 2014
Business LinesDevelopment and manufacture of indus-trial microscopes and measuring systems, and X-ray/CT inspection systems
Current State• Growing market for X-ray/CT inspection
systems and non-contact 3D metrology systems
• Shift in competition from equipment specifi cations to ability to propose systems for customers
• Application software is increasingly important
Strategic Direction• Expand business domains through M&A
and alliances• Capture leading market position in X-ray/
CT inspection systems and non-contact 3D metrology systems
• Propose solutions by strengthening application software
Business LinesDevelopment and manufacture of a broad lineup of microscopes, ranging from those for cutting-edge research to microscopes for clinical, educational, and practical training applications
Current State[Existing Domains]• Increased demand for super resolution
microscopes and analytical software[New Domains]• Stem cell business is growing• Fusion of electronic and optical
microscopes
Strategic Direction• Expand business domains through M&A
and alliances• Provide total solutions centered on
image analysis• Enhance and expand super resolution
microscope systems• Bolster sales force in priority regions and
fi elds of research
Business DirectionLeverage Nikon’s core competencies to answer unmet medical needs Signifi cance of Our Entry• Contribute to accurate diagnosis and
treatment• Relieve the physical burden and
impact on patients• Shorten times required for diagnosis,
treatment, and hospitalization
▲
Lessen the burden of medical costs Fields We Will Enter• Prevention• Diagnosis• Treatment• Prognostic management• Drug discovery support• Regenerative medicine
Future Growth Drivers
Management Numerical Targets by Business
Net Sales(Billions of yen)
Years ended / ending March 312014(result)
2015 (target)
2016 (target)
2017(target)
Precision Equipment Business
205.4 210.0 230.0 230.0
Imaging Products Business 685.4 590.0 670.0 700.0
Instruments Business 64.7 70.0 80.0 100.0
Medical and New Businesses
0 0 40.0 130.0
Others 24.9 30.0 30.0 40.0
Operating Income(Billions of yen)
Years ended / ending March 312014(result)
2015 (target)
2016 (target)
2017(target)
Precision Equipment Business
20.0 19.0 36.0 36.0
Imaging Products Business 64.2 58.0 75.0 85.0
Instruments Business (2.1) 1.0 3.0 8.0
Medical and New Businesses
0 0 1.0 4.0
Others 4.4 5.0 5.0 6.0
Microscope Solutions Business Industrial Metrology Business Medical Business
P. 28 P. 30P. 26
* Figures for the fi scal year ending March 2015 are as of August 7, 2014; fi gures for the fi scal year ending March 2016 and the fi scal year ending March 2017 are as of the announce-ment of the Medium-Term Management Plan on June 17, 2014.
17NIKON REPORT 2014
Close consultation between business units is essential to well-balanced management resource allocation, but no less so than careful, and occasionally bold, decision making that considers short- through long-term perspectives.
Tomohide HamadaSenior Vice President and Director,General Manager of Corporate Strategy Division
What is the role of the Corporate Strategy Division?
Following a change from the in-house company system we had
for 15 years to a divisional organization system, we are now
prepared for structural reform. Our division has three roles to
fulfi ll to implement this reform as quickly as possible. First,
under this extensive reorganization, we are arranging the work
environment so that every unit will concentrate on carrying out
its particular function smoothly. Second, we ensure the proper
sharing of information between management and the business
units so that management strategies can be quickly put into
action. And third, as an important part of the Medium-Term
Management Plan, we are stimulating the launch of new
businesses by appropriately allocating management resources.
Allocating management resources between new and existing
businesses in a balanced way to benefi t the entire Company
should, of course, be carried out in consultation with each unit,
but, given both short-term and medium-to-long-term consider-
ations, deciding the amounts for individual businesses and
timing requires care and, occasionally, boldness.
BUSINESS STRATEGY
What is the basic outline behind your fi nancial base as you set up an aggressive investment strategy?
Considering the amount of time required for a new business to
turn a profi t, we need to make our business base leaner and
stronger, including in terms of cost competitiveness, so that our
established operations are solidly generating cash. With this in
place, we will be able to funnel much of the cash and reserves
from existing businesses into our longer-term areas. For M&A
funds, present and prospective cash reserves should be ade-
quate, but if necessary we can make use of such debt fi nancing
as bank loans.
What are your thoughts on Nikon’s branding as you head forward?
We would like the technology, ideas, and solutions of Nikon to
continue to be regarded as the opportunity to give new value
to society and people. We also want to build the ideas of
innovation and fun into our brand based on our aspirations,
“Meeting needs. Exceeding expectations.”
To promote branding is more problematic with B-to-B
products than with cameras, which are readily available to
consumers. We think, for example, the strategy for us may
be to connect our businesses to one another, beginning with
cameras where the brand is already established, to microscopes,
and followed by semiconductor lithography systems and FPD
lithography systems.
Interviews with Key People on the Strategy Going Forward
Corporate Strategy Division
18 NIKON REPORT 2014
In your overall view of the Nikon Group, what do you see as important for achieving the goals of the Medium-Term Management Plan?
Making the Medium-Term Plan a reality means more than
merely having the business units get along with one another.
We must have a collective effort to make the plan work. If we
simply decided the content of the Medium-Term Plan and left
it to the business units to carry out, there would be no need for
a Corporate Strategy Division. Our job is to work together with
the business units on various challenging issues. There are
instances when, for the sake of the entire Company, we have
to request a business unit to simply scale back investment or
to make other sacrifi ces. We must exhibit unswerving leadership
in carefully explaining to the unit the background and aim of
this decision as well as the reason why such a move may be
essential for the medium-to-long-term growth of the Nikon
Group as a whole.
We have also made it known that we are ready to engage in
M&A or business alliances or use corporate venture capital to
quickly start up new businesses. In this business environment
of rapid change, we may come up with a great technology or
idea, and we must also immediately determine how to effectively
utilize it. We have made use of the expertise of a third party
to accelerate the growth of a business. In developing new
businesses, our divisions gather information and make decisions
together with the relevant department. In this process, the
Corporate Strategy Division further develops its knowledge and
ability to make judgments. Thus if a gap emerges between what
a business unit and management decide is of value, we would
want to be in a position to present an objective and appropriate
resolution for both sides.
How do you view the initial fi scal year, ending March 2015, of the Medium-Term Management Plan?
Through changes from this reorganization brought about by
our command structure and business process transformation,
we are working to make the fi scal year ending March 2015 a
year in which every employee can feel Nikon moving further
toward steady growth. We will also take on the challenge of
providing the accurate guidance required to implement the
Medium-Term Plan.
As an engineer, I have spent a considerable amount of
time designing control devices used for lithography systems.
Designing control devices and managing have some common
elements, I believe. For example, a control device can be made
more precise through the use of feedback from data obtained
after operating the device. In a similar way, the disparity
between budgeted fi gures and those that subsequently show
up on the balance sheet and statement of income can be used
as feedback when preparing the budget for the following year.
Adjusting control after obtaining results, however, gives rise to
a time lag, so in our most recent control devices the concept
of “feed forward” has been introduced. Feed forward is a way
to optimize commands to the control device before the results
come out, so it can be used to make the device even more
precise and productive. It is a great method, but its success
requires not only knowing the device inside out but also fully
understanding the conditions that may affect the device,
including the entire production line. I am now looking into how
to apply the feed forward method to management to determine
if it can accurately lead us to the position Nikon needs to reach.
Such success, as I mentioned, would require thorough knowledge
of each business unit. If utilizing this engineering experience
could assist in managing more accurately, I believe our business
activity could speed up and we may be able to seize more
business opportunities.
19NIKON REPORT 2014
How would you sum up the fi scal year ended March 2014?
Even though the semiconductor market exceeded US$300 bil-
lion in 2013, investment in this area declined over the past two
years, and the market scale of semiconductor lithography sys-
tems we manufactured decreased again during this diffi cult year.
In this environment, we promoted sales of our NSR-S621D
(launched in 2012) and NSR-S622D (launched in 2013) ArF
immersion scanners, which have been designed to meet semi-
conductor manufacturers’ demands for miniaturization, and we
also focused on acquiring new customers. During the fi scal year
ended March 2014, we made a delivery of an ArF immersion
scanner to a sixth company. Looking back at an earlier time,
we admit that our products may not have been as attractive
as those of our competitors in terms of performance or produc-
tivity, but the capacities of our more recent NSR-S621D and
BUSINESS STRATEGY
NSR-S622D scanners and their productivity have boosted our
presence in the market.
Since April 2014, we have begun taking orders for the
successor to the NSR-S622D, our most up-to-date NSR-S630D
ArF immersion scanner. With its high overlay accuracy, this
scanner improves the yield, making us a strong competitor.
Semiconductor manufacturers are pleased with its performance,
so we believe we are now poised to increase our market share.
Where are you headed in the fi scal year ending March 2015?
Ever-shrinking investment in semiconductors may turn in a
positive direction in 2014, as semiconductor manufacturers
appear to be directing resources to increased miniaturization.
We thus expect to sell more units in the fi scal year ending
March 2015 than in the previous year.
ArF immersion scanner NSR-S630D
Interviews with Key People on the Strategy Going Forward
In the rapidly changing semiconductor industry, responding to customer needs promptly is crucial. I stay in close contact with the worksite and our customers in this business, working to realize additional growth through timely action.
Toshikazu UmatateSenior Vice PresidentGeneral Manager of Semiconductor Lithography Business Unit
Semiconductor Lithography Business Unit
Semiconductor Lithography Systems, Unit Sales by Technology (including refurbished equipment)(Years ended March 31)Units
■■ ArF immersion ■■ ArF ■■ KrF ■■ i-line
2012 2013 2014
100
80
60
40
20
0
84
40 40
35
3
28
18
16
83
13
12
118
9
Refer to “Management’s Discussion and Analysis” for details on performance. P. 48–51 Precision Equipment Business
ArF immersion scanner NSR-S630D
20 NIKON REPORT 2014
Though customers are expressing more interest now that our
products are competitive, we will focus on how new customers
can utilize our products thoroughly. If our customers can
generate great results with better capability and favorable
cost performance, that information will spread throughout the
industry. This will lead to sales growth and help our business
discussions go more smoothly. Laying the groundwork fi rst will
lead to great strides later on, we believe. This is how we aim to
increase our customer base: by giving customers solutions of
greater precision in the entire production process and making
it easier for them to use our products.
Also, in the Medium-Term Management Plan we have set a
goal of at least a 30% market share for ArF immersion scanners,
featuring our newly developed NSR-S630D.
What business opportunities do you see in the semiconductor market?
If a novel device appeared that diverted attention away from
smartphones and tablets, a new market could develop that
would prompt semiconductor manufacturers to increase
investments.
Also, it is clear that in developing countries, with their
growing economies, demand for semiconductors will continue
to rise. Since we have worked to enhance the performance and
productivity of our semiconductor lithography systems and
improve their cost performance, we certainly will capture these
business opportunities.
What is the plan regarding how to enhance cost performance?
The need to miniaturize continues on, year after year. But a
considerable amount of capital is needed to develop methods
for further miniaturization, and we have to clear more in profi ts
to obtain the amount of capital that is needed. We are thus
forced to revise our breakeven point and are working on structural
reform to lower both fi xed and variable costs.
To lower fi xed costs, we have been shifting personnel to
other units, outsourcing work, and streamlining our operations.
Until recently, we possessed a uniform in-house supply chain,
from development through materials procurement to manufac-
turing, but now only the most vital and core items that set the
Nikon brand apart, such as projection lenses, are handled
internally, while parts that can be manufactured more effi ciently
by other companies are outsourced. In development, we have
discarded the notion to undertake all activities ourselves and do
not hesitate to use outside companies for tasks where they are
more advanced.
We reduce variable costs, such as for procurement, where
we can, and in development we can reduce wasteful spending
by more judiciously selecting which projects to begin.
Through these efforts, we are improving the breakeven point
of our business so that we are able to return to a profi table
status with our current level of net sales.
What type of business model should you be aiming for?
The days are gone when we could simply step up the resolution
performance in our scanners. Overlay accuracy and other aspects
of productivity have become important. In our business unit,
we strive to come up with solutions for what is needed in the
customer’s manufacturing process or how best to interface our
equipment with a customer’s other systems. We also look for
ways to collaborate with manufacturers of various materials or
equipment.
Another approach is to continue to cultivate solid relation-
ships with our customers. One key to this approach is modularity,
which we brought in with the basic design of the NSR-S620
(launched in 2009). Going modular enabled us to make devel-
opment and manufacturing much more effi cient. In addition,
we found we could service the customers who had purchased
the NSR-S620 systems by enhancing their performance with
modular upgrades. Increasing the productivity of an apparatus
tends to be costly no matter what; however, buying a new model
every time productivity needs to be raised would be a particularly
ineffi cient investment by the customer. A look at trends in
semiconductor-related investment indicates how important
upgrading is in a business model. So when we offer a solution,
we aim to continue our services after installation to establish
a stable base of revenue.
With all the changes that are occurring in the semiconductor
industry, it is important to meet the customer’s needs as promptly
as possible. I would thus like us to bring about further growth
through timely action, whether at our worksites or when working
closely with customers.
21NIKON REPORT 2014
What are the competitive priorities for the FPD Lithography Business Unit?
In our unit, several senior staff and I have central control over
the technical development, manufacture, quality control, and
sales of fl at panel display (FPD) lithography systems so we can
make decisions swiftly. We are also close to our customers and
can thus easily ascertain their issues and needs, and we regard
the ability to make quick and accurate judgments as one of the
unit’s strengths.
Another one of our FPD lithography systems’ strengths is
the unique Multi-lens Projection Optical System, consisting of
high-precision projection lenses arranged to cover a wide range
of exposure. With an increased number of lenses, this innovative
system can be used with larger glass plates. Installed in our
FX-101S FPD scanner, these multiple lenses perform the func-
tion that one giant lens would, making it amenable to use with
BUSINESS STRATEGY
a large 10th-generation 2,880 mm × 3,130 mm glass plate,
effi ciently giving exposure to panels in the upper 50 to 60 inch
range. The only company selling FPD lithography systems for
10th-generation large glass plates is Nikon.
At fi rst, we were focused entirely on larger FPDs, drawing
a road map to our progress to 11th- and 12th-generation large
glass plates. Then a few years ago, we saw the need for higher
defi nition outstripping the need for larger displays, so we
switched our direction to high-defi nition panels. Using the
Multi-lens Projection Optical System as it was, we managed
to make the projection lens and equipment higher in defi nition
and performance. As a result, I think we came out on top in
FPD lithography systems for small and medium-sized high-
defi nition panels in an expanding market for smartphones
and tablets.
This is an example of where we were experienced enough to
take advantage of a new business opportunity by leveraging our
existing technology and other strengths.
FPD scanner FX-67S
Interviews with Key People on the Strategy Going Forward
To be positioned to revitalize the display market, we have to predict future needs and market our products based on accurate investment decisions to meet these needs.
Kiyoyuki MuramatsuCorporate Vice PresidentGeneral Manager of FPD Lithography Business Unit
FPD Lithography Business Unit
FPD Lithography Systems, Unit Sales by Generation(Years ended March 31)Units
■■ 7G and above ■■ 5G / 6G ■■ 4G
2012 2013 2014
100
80
60
40
20
0
86
43
56
37
17
32
4
1
38
4
7
45
Precision Equipment Business Refer to “Management’s Discussion and Analysis” for details on performance. P. 48–51
22 NIKON REPORT 2014
What are your thoughts on the fi scal year ended March 2014?
We focused on three areas in the fi scal year ended in March
2014. The fi rst was further enhancing high defi nition in our
FPD lithography systems for small and medium-sized panels.
With steadily increasing demand for FPD lithography systems
for small and medium-sized panels, we sold seven more systems
than in the previous year, and as customers called for additional
advances in high defi nition, we applied ourselves to developing
equipment to meet their needs. The second area was making
our FPD lithography systems for 8th-generation large glass plates
more competitive. This system is involved stiff competition, so to
establish clear technical superiority we brought in technology
we had cultivated in our systems for 10th-generation large glass
plates and systems for 6th-generation high-defi nition panels to
realize marked advances in tact time,* overlay accuracy, and
resolution for our FPD lithography systems for 8th-generation
glass plates. The third area was to reduce costs in our business
processes. We thoroughly reduced costs and shortened the lead
time from development to sales and the system’s installation.
These efforts unequivocally bore fruit for us.
* This is the time needed to process one glass plate.
What will be the thrust of the strategy in the FPD Lithography Business Unit going forward?
Investment in the 6th-generation glass plates has run its
course, and demand for this equipment is declining. Demand
for 8th-generation glass plates for large-screen televisions is
likewise waning. Reasons behind this include a continuing drop
in the price of FPDs throughout the world and hesitancy among
panel manufacturers to make additional investments. The FPD
lithography systems market as a whole is expected to be fl at for
some time.
Even in such a challenging environment, Nikon could record
solid growth through the adoption of three steps. The fi rst and
most important step is the competitive potential of the products.
Our basic direction must lean more toward making the technol-
ogy outstanding than lowering prices, so we will enhance
performance and establish ourselves as the top manufacturer
in high-defi nition equipment. The second step is deepening
relationships with our customers. While we, of course, duly
inform potential customers about the fi rst-rate performance of
our FPD lithography systems, we continuously cull information
directly from our existing customers, respond quickly to their
most demanding concerns, and promptly incorporate customer
feedback into our development and manufacturing. The third
step is setting up a fl exible manufacturing base. The idea is not
to undertake everything in-house, but rather to create a system
to link us with the appropriate external resources to enable us
to respond promptly to sharp changes in demand.
What do you envision in the medium-to-long term for the FPD Lithography Business Unit?
We have made it our goal to be an operation that supports the
advances of the display industry. To achieve this goal means
becoming a catalyst to activate the display market, foreseeing
future needs, and launching the right products. Needs, however,
are quite varied, so we receive various types of requests from
our customers. We would have diffi culty tending to all of our
customers’ requests with our fi nite resources, so someone must
correctly decide the requests to act on, which I see as my
responsibility. Investing, likewise, requires diffi cult choices
about where to expect sure profi tability and how to effi ciently
allocate funds.
We will also be placing emphasis on the business after
sales. Buying the latest equipment is an easy way to secure
high performance, but we realize that not every customer can
afford to simply install the newest equipment in a new plant.
This problem has prompted us to refl ect on a new business
opportunity. The latest equipment is not really necessary, for
example, to expose the displays of cheap smartphones that
have become so popular. Often, this can be done by updating
older equipment. Since this type of demand has begun to
appear, we are seeking business from equipment that has been
previously at customers’ sites.
We are also venturing into fi elds outside of FPD lithography
systems to stimulate the display industry. By applying Nikon’s
existing technology and dovetailing it with great technologies
of other fi rms, the possibilities for creating new forms of value
seem limitless.
23NIKON REPORT 2014
Could you give us an overview of the fi scal year that ended in March 2014?
In the fi scal year ended March 2014, the market for digital
cameras was sluggish and diffi cult, particularly in China
and Europe.
With economic recovery still lagging, the market for
interchangeable lens-type digital cameras struggled to gain
a foothold, and as a result sales of cameras were lower than
in the previous year.
Sales of compact digital cameras were down as well, but
since the decrease was less than that of the market as a whole,
our market share actually increased. I believe this was thanks
to our strategy of rolling out a full line of cameras, from entry
models to high-end products, which set the Nikon brand apart
from other brands, and to retailers that wanted to stock their
shelves with our brand of attractive products.
BUSINESS STRATEGY
During the fi scal year, we placed more emphasis on revenue
than on volume sold and thus, centering on the digital SLR
camera, we took a fresh approach regarding sales channels.
We also managed to aggressively slash expenses, streamline
development, design, and manufacturing, and lower supply
costs so that in spite of the sluggish market, profi ts increased.
What do you predict for the future market environment?
As technology has matured, our products themselves can no
longer be as distinct. Consequently, price wars are becoming
fi ercer, making it essential to continuously and thoroughly
reduce costs to maintain a profi t.
Looking at different regions, Europe, particularly Russia,
has demonstrated a slow fi nancial recovery. North America is
bullish, whereas South America is struggling. In Asia, developing
countries, notably China, still have promising growth prospects,
so a gradual recovery has been made from the slump in the
fi scal year ended March 2013.
What initiatives lie ahead for the Imaging Business Unit?
We are working on three strategies to boost profi ts in the
medium-to-long term.
The fi rst strategy is to generate market activity by introduc-
ing innovative products. This may involve working with other
companies. The second strategy is to exploit new marketing
techniques to stimulate demand. One such technique is
Interviews with Key People on the Strategy Going Forward
In this challenging market environment, we fi nd it is important to use fl exible judgment and quick action to build up a string of successes. We will add new value by merging user enjoyment with the reliability of our technology and quality.
Nobuyoshi GokyuSenior Vice PresidentGeneral Manager of Imaging Business Unit
Imaging Business Unit
Unit Sales of Interchangeable Lens-Type Digital Cameras(Years ended March 31)Thousands of units
Unit Sales of Compact Digital Cameras(Years ended March 31)Thousands of units
2012 2013 2014
8,000
6,000
4,000
2,000
0
4,740
6,980
5,750
2012 2013 2014
20,000
15,000
10,000
5,000
0
17,370 17,140
11,160
Imaging Products Business Refer to “Management’s Discussion and Analysis” for details on performance. P. 48–51
24 NIKON REPORT 2014
strengthening customer relationship management (CRM),
a main point of CLM,* which focuses on the relationship
between the customer and the product. With customer data
accumulated over the past 10 years on the approximately 200
million items we have sold, we are setting up a system to effec-
tively use this large amount of data to make timely suggestions
to customers in purchasing either new products or replacements
or adding lenses. We plan to come up with novel products
based on an analysis of this data in the hopes of bringing in
new customers. The third strategy is to entrench ourselves and
to exploit our advantage in developing markets, which we view
as strategic markets for business development. Along with
China, our most important market, we are pursuing activities
in the markets of India, ASEAN countries, Central and South
America, and Africa. Our plan for China is to focus on its
third- and fourth-tier cities, which are home to 500 million
people, thus increasing our presence to win a larger share of
the growing Chinese market.
We are reducing costs by scrutinizing the entire supply chain,
probing the developments, procurements, and manufacturing of
every section while building on the measures each has taken to
date. Our ability to enhance profi ts has two wheels: expanding
sales and improving cost competitiveness.
* CLM: Customer Lifecycle ManagementAn approach using vast amounts of data and information technology to ascertain the “lifecycle” events of customers, such as new purchases, repairs, upgrading, or adding lenses, to prompt the timing of cross-sales or to make fuller contact through support services, for example, thereby enhancing purchases of Nikon products.
What can you tell us about Nikon’s basic thinking on supply chain management?
The main issue is how to best manage inventory. Although we
need to have enough items in stock for growing markets, we
are basically aiming to keep our inventories down. To this end,
we are moving to weekly planning of manufacturing and sales,
which means quantifying trends in worldwide manufacturing
and sales based on projected demand and shortening lead times
between manufacturing and sales. Reducing inventory even
further requires more fi nely tuned forecasts. By meticulously
identifying locally embedded information and being sensitive as
we collect it, we can deliver products better tailored to regional
needs in a timely way with nothing wasted.
What is your medium-to-long-term vision for the Imaging Business Unit?
The imaging industry has the potential to change considerably,
becoming more diverse and employing technologies that we
cannot yet imagine. For us, such change in the market could
translate to promising business opportunities. We have high-
level technologies in optics and image processing, and we want
to combine these technological strengths with the joy of sharing
video and images once they have been taken to provide new
value. Regarding the hardware itself, of course, we can still
further adjust the basics of taking a picture, but we must focus
on making the compact digital camera more distinct from the
smartphone with such features as an ultra telephoto function
or a waterproof design. Taking a photo is the fi rst step, but how
can we make it more fun after the picture has been snapped?
How would I more fully enjoy photography? This is what we
must think about at all times, incorporating trial and error to
offer added value and meet diverse needs.
I think the Nikon brand represents reliability and, even
more so, quality. Our goal is to determine how to raise aware-
ness among many more customers of our reliability and to build
a lasting appreciation of it over time. Though market conditions
may be quite diffi cult, we are positive and enthusiastically want
to offer a variety of products to satisfy our customers. I fi rmly
believe that the road to our great success will be by communi-
cating openly throughout the organization and using fl exible
judgment and quick action to build up a string of successes.
Digital SLR camera Nikon D810 Interchangeable lens-type advanced digital camera Nikon 1 J4
Compact digital camera COOLPIX S9700
25NIKON REPORT 2014
What direction do you foresee for this business unit?
We have divided the strategy for our business unit into existing
areas and new areas. Our basic direction is to strengthen the
existing business base and apply our technology to new areas,
moving the entire business ahead.
Our existing areas of focus are in the fi eld of biological
microscopes. We believe that super resolution microscopes
incorporating our latest technology, coupled with analytical
software that our customers have requested, will enhance
profi ts in the microscope market. This market as a whole has
reached maturity, however, so we understand it will be diffi cult
to achieve high growth from existing areas alone.
BUSINESS STRATEGY
We see potential market growth, on the other hand, in such
new areas as the stem cell business, an area in which we can
assist in regenerative medicine and drug discovery support. We
regard one of our strengths as live cell imaging technologies for
induced pluripotent stem (iPS) cells and embryonic stem (ES)
cells, and we hope to accelerate this from one of our strengths
into a full business. We are also giving attention to amalgamat-
ing electron and optical microscopes to effectively analyze areas
such as brain structure, a new fi eld that is expected to grow and
a market worthy of the launch of new products.
Interviews with Key People on the Strategy Going Forward
While strengthening the business structure in existing domains, we will apply technology cultivated in those fi elds to new domains with anticipated market growth for a major leap forward in our business.
Atsumi NakamuraCorporate Vice PresidentGeneral Manager of Microscope Solutions Business Unit & Department Manager of Marketing Department
Microscope Solutions Business Unit
Instruments Business
Super resolution microscope system N-STORMImage of iPS cell captured using BioStation CT integrated cell culture observation system
Refer to “Management’s Discussion and Analysis” for details on performance. P. 48–51
26 NIKON REPORT 2014
What was your impression of the fi scal year ended March 2014?
Net sales improved substantially from the previous year as